This is where 80% of your seat is lost.

Estimated monthly mortage/insurance/tax + loan payment would hover around $3500, not including utilities.Since we have lived in 3 ADU's in the past as tenants, we've accurately estimated that our proposed 1 bed 1 bath with fenced-off yard and pergola, ADU could rent for $1700/mo easily, with the tenant paying their own utilities.Our budget is no more than $475K, including money earmarked to repair main house (because honestly, we won't be getting anything pretty in San Fernando Valley at this price range) and construction loan for the ADU. 

U can’t easily find B class properties to be all in for $65k.

Yes the section 8 is not accepted by 80-90% of Sacramento easily.

That's a good plan and I see you easily hitting that target.

Your 800 Fico should help you easily to attain that

She could easily forward me applications if it went vacant, I have online bill pay that they'd be paying me directly, and I can pay any repairs that need to be done.

Give in now and be prepared for the floodgate of demands over TONS of other stuff They just realized that you are soft and can be pushed around....have fun with that.....Yes, throwing down some seed is easy and cheap....... and I would easily have done that for a nice and respectful tenant that asked for it.....but be an a-hole and threaten me with discrimination allegations and its GAME OVER......this isn't about how easy or cheap the fix is....this is about your future relationship with these tenantsThis is a test..... who runs the show.... you choose......

I use an online management portal (cozy.co) where you can easily switch on the requirement for tenant to upload or purchase insurance direct from site. 

The average on Rentometer.com, says $1300 and with me knowing Fontana, you can easily get $1400 once you rehab.